HP0078, LD 95, item 1, An Act To Provide Income Tax Relief

An Act To Provide Income Tax Relief

Be it enacted by the People of the State of Maine as follows:

Sec. 1. 5 MRSA §1518-A, as amended by PL 2011, c. 692, §1, is repealed.

Sec. 2. 5 MRSA §1536, sub-§1, as amended by PL 2013, c. 1, Pt. E, §2, is further amended to read:

1. Final priority reserves. After the transfers to the State Contingent Account pursuant to section 1507, the transfers to the Loan Insurance Reserve pursuant to section 1511 and the transfers pursuant to section 1522, the State Controller shall transfer at the close of each fiscal year from the unappropriated surplus of the General Fund an amount equal to the amount available from the unappropriated surplus after all required deductions of appropriations, budgeted financial commitments and adjustments considered necessary by the State Controller have been made as follows:

A. Forty-eight Sixty-eight percent to the stabilization fund;

C. Thirteen percent to the Reserve for General Fund Operating Capital;

D. Nine percent to the Retiree Health Insurance Internal Service Fund established in section 1519 to be used solely for the purpose of amortizing the unfunded actuarial liability associated with future health benefits; and

E. Ten percent to the Capital Construction and Improvements Reserve Fund established in section 1516-A ; and .

F. Twenty percent to the Tax Relief Fund for Maine Residents established in section 1518-A.

Sec. 3. 5 MRSA §1536, sub-§3, as enacted by PL 2005, c. 2, Pt. A, §5 and affected by §14, is repealed.

Sec. 4. 36 MRSA §5111, sub-§1-D, as enacted by PL 2013, c. 368, Pt. Q, §4, is amended to read:

1-D. Single individuals and married persons filing separate returns; tax years 2014 and 2015. For tax years beginning on or after January 1, 2014 and ending before January 1, 2016, for single individuals and married persons filing separate returns:

If Maine Taxable income is:	The tax is:
At least $5,200 but less than $20,900	6.5% of the excess over $5,200
$20,900 or more	$1,021 plus 7.95% of the excess over $20,900

Sec. 5. 36 MRSA §5111, sub-§2-D, as enacted by PL 2013, c. 368, Pt. Q, §6, is amended to read:

2-D. Heads of households; tax years 2014 and 2015. For tax years beginning on or after January 1, 2014 and ending before January 1, 2016, for unmarried individuals or legally separated individuals who qualify as heads of households:

If Maine Taxable income is:	The tax is:
At least $7,850 but less than $31,350	6.5% of the excess over $7,850
$31,350 or more	$1,528 plus 7.95% of the excess over $31,350

Sec. 6. 36 MRSA §5111, sub-§3-D, as enacted by PL 2013, c. 368, Pt. Q, §8, is amended to read:

3-D. Individuals filing married joint return or surviving spouses; tax years 2014 and 2015. For tax years beginning on or after January 1, 2014 and ending before January 1, 2016, for individuals filing married joint returns or surviving spouses permitted to file a joint return:

If Maine Taxable income is:	The tax is:
At least $10,450 but less than $41,850	6.5% of the excess over $10,450
$41,850 or more	$2,041 plus 7.95% of the excess over $41,850

Sec. 7. 36 MRSA §5111, sub-§6 is enacted to read:

6. Balancing of tax brackets. For tax years beginning on or after January 1, 2016, taxes assessed under this section are calculated using income tax bracket thresholds calculated under this subsection.

A. By October 1, 2015 and every 5 calendar years thereafter, the assessor shall calculate income tax bracket thresholds for single individuals and married individuals filing separately, married individuals filing jointly and surviving spouses and heads of households that result in the balancing of individual income taxes so that the following percentages of tax filers for each filing status pay the following top marginal tax rates ranked from lowest taxable income to highest taxable income:

(1) With a top marginal tax rate of 0%, 18% of filers;

(2) With a top marginal tax rate of 2%, 22% of filers;

(3) With a top marginal tax rate of 4.5%, 22% of filers;

(4) With a top marginal tax rate of 7%, 17% of filers;

(5) With a top marginal tax rate of 8.5%, 13% of filers; and

(6) With a top marginal tax rate of 10%, 8% of filers.

B. For purposes of making the calculation under paragraph A, the following provisions apply.

(1) When determining the percentage of filers, the assessor shall use the average number of Maine resident filers for the 5 calendar years prior to the calculation.

(2) The percentage of filers must be determined for each filing status of single individuals and married individuals filing separately; married individuals filing jointly and surviving spouses; and heads of households.

(3) The top marginal tax rates are applicable to Maine taxable income.

C. The income tax bracket thresholds calculated under paragraph A apply to tax years beginning on or after the January 1st following the determination of the new income tax bracket thresholds.

D. The assessor shall submit a report to the joint standing committee of the Legislature having jurisdiction over taxation matters by October 15th of the year of calculation containing the new income tax bracket thresholds, describing the method used to make the calculation and the income tax bracket threshold amounts and estimating the impact of the new rates on individual income tax revenues.

Sec. 8. Effective date; application. This Act takes effect September 1, 2016 and applies to tax years beginning on or after January 1, 2016.

summary

This bill reforms the Maine income tax by establishing a rate structure that includes 6 income tax bracket thresholds with top marginal tax rates from 0% to 10%. The income tax bracket thresholds for each rate are calculated by the State Tax Assessor every 5 calendar years to maintain the same level of progressivity of the tax by maintaining the same percentage of taxpayers in each top marginal rate category.

This bill also repeals the Tax Relief Fund for Maine Residents and increases the percentage of excess General Fund revenues transferred to the Maine Budget Stabilization Fund by the amount currently transferred to the tax relief fund.

HP0078 LD 95	Session - 127th Maine Legislature		LR 265 Item 1
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